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January 27, 2010

Socially Responsible Funds Outperformed Investing Benchmarks in 2009

Another set of data has been released supporting the argument that investors pay a performance penalty for taking social responsibility into account when making investment decisions is nothing more than an urban legend were released on January 21. A review released January 21 by the Social Investment Forum (SIF) of 160 socially responsible mutual funds found that 65% of those funds outperformed their benchmarks in 2009. These SRI funds, from 22 SIF member firms, topped benchmarks across almost all asset classes. Of particular note was the performance of 73 large-cap funds, where nearly three out of four (72.6%) outperformed the S&P 500, on average by more than 6%. The data covered all of 2009 and was provided by an independent third party, Thomson Reuters, and also showed that a majority of the large-cap funds offered by SIF members outperformed the S&P 500 over three years and 10 years.

Results were also impressive for small-cap funds (16 funds analyzed outperformed the Russell 2000 by an average of 5.2%); fixed income bond funds (15 funds analyzed outperformed Barclays Capital U.S. Aggregate Index by an average of 2.11%); balanced funds (nine funds analyzed outperformed a 60/40 blended benchmark of the S&P 500 and Barclays Capital U.S. Aggregate by an average of 2.14%); and international equity-global funds (five funds outperformed the MSCI World index by an average of 4.24%). The only underperformance was recorded by U.S. mid-cap (-1.14%) and international equity (Europe, Australasia, Far East--EAFE) funds (-4.35%),

In announcing the results of the fund analysis, Cheryl Smith, SIF chair and president of Trillium Asset Management, noted that the analysis "underscores the reality that socially responsible investments offer what are genuinely competitive returns. It reaffirms and underscores that SRI investment strategies do not sacrifice returns."

The chart allows interested advisors and investors to learn more about SRI mutual funds based on asset class, performance record, approaches to environmental, social, and governance (ESG or sustainability) issues, proxy voting guidelines, and other investment criteria.